Double standards the official fight against tax fraud versus growing illicit financial flows Officially, these issues have nothing to do with FTAs or IIAs – or the EU. FTAs govern transfers of goods and services between states, and IIAs (International Investment Agreements) and BITs (Bilteral Investment Treaties) protect foreign capital that was transferred in investments, and the earnings arising. Tax relations between states are regulated bilaterally, with no role for the EU, in which taxation (except VAT) remains the responsibility of member states. Treaties dealing with tax issues are therefore a matter for each member state. FTAs and IIAs do not cover this ground either. Nor is there any global regulation of corporate profit or income taxation, in sharp contrast to the rules on so many other aspects of economic administration imposed by the WTO and other bodies, including, in the fiscal area, duties on imports and exports. Where there are bilateral tax treaties between countries, their purpose is usually to avoid double taxation. Mexico recently had double taxation agreements with 40 countries, according to a study of ‘illicit financial flows, macroeconomic imbalances, and the underground economy’ in that country.48 The complementary issue, largely neglected until very recently, is double non-taxation: when tax that should be due is not paid in either jurisdiction, for various reasons. However, over the course of the last generation the IMF and WTO between them have forced a big reduction in the tax base of many developing countries, which traditionally relied heavily on ‘border’ taxes (duties) on international trade, since they are easily identified and hard to evade. Both IMF stabilisation programmes and WTO trade rules have reduced these in the interests of ‘efficient global markets’ (and, by implication, the TNCs’ value chains). Are the FTAs, IIAs and BITs – including the one between Mexico and the EU, as well as its projected successor – at all responsible for the problem of BEPS and tax avoidance? Is it in any way related to the liberalisation of trade and investment? Is there any danger that a new CETA-style agreement with the EU will make the problem for Mexico worse? Or is corporate tax planning and its regulation an entirely separate process, which has few links with the trade regime? As an active member of the OECD, Mexico provides that organisation’s current Secretary-General and is keen on the OECD’s programme to fight tax avoidance, the 15-point ‘Action ...
